Yahoo Finance What to Do With That 2 Percent Raise on Your Social Security Checks
If you're one of the 66 million Americans who receive a Social Security check or Supplemental Security Income, you've probably heard the news: In 2018, Social Security checks will get a raise -- of 2 percent.
That doesn't sound like much, but it's the first substantial bump in pay in some time. For 2017, Social Security checks rose 0.3 percent. The year before, Social Security checks didn't get any raise. For 2015, there was a 1.7 percent raise.
So now that you're getting all of this "extra" money, what should you do with it? That depends on a number of factors, starting with whether Social Security is your only form of retirement revenue or whether it's one of several. In any case, if you're looking for ideas, here are a handful. Depending on how things work out, you may be able to do a lot with a little.
[See: Are You Social Security Savvy?]
Do nothing; stay the course. No need to feel guilty if you don't plan on socking away the extra 2 percent into a savings account or investing it. The money you're receiving isn't exactly a windfall, and it isn't supposed to be. Social Security raises are cost-of-living adjustments, and they're designed to help seniors pay for their everyday expenses.
And it isn't as if your raise is going to pay for all that much.
The average Social Security check is $1,377 a month, and so next year, a typical payment will climb by $27 a month.
Obviously, that isn't much, although over the course of a year, that adds up to $324, which is ... still not all that much. So if you plan on doing nothing special with your raise, don't feel guilty, says Carmen Dellutri, president and CEO of The Dellutri Law Group, a personal injury and bankruptcy firm in Fort Myers, Florida.
"It all comes down to the individual," he says. "If the person needs that amount to meet their monthly financial needs, then, obviously, that is the best use of the money. They earned the benefit, and they should use the money to make their lives a bit easier. If the person or couple doesn't need the money to maintain their standard of living because they have other streams of income, then they can use the money in a multitude of ways."
And while $27 a month isn't much, Dellutri points out that if you're married, and you both have $27 a month coming in, that's $54 a month. It still isn't a fortune, but it adds up to $648 a year. And if you have other sources of retirement revenue, chances are, you could use that $648 for something useful.
[See: 10 Ways to Increase Your Social Security Payments.]
Save the raise for medical expenses. If you can, Michael Solari, who owns Solari Financial Planning in Bedford, New Hampshire, suggests earmarking that extra two percent for anything health related.
"Medicare doesn't cover everything, and it's no secret that as you age you'll need more medical attention," he says.
Not a bad idea. Every year, Fidelity Benefits Consulting comes out with an annual retiree health care cost estimate, and in September, they announced that the estimate for health care spending is currently an average of $275,000 per couple, $15,000 more than the projections in 2016. So if you're part of a retired couple who has Medicare insurance coverage, you can assume you'll spend a collective $275,000 on medical expenses throughout your retirement -- not including possible nursing home care costs.
Put the extra money in a savings account. If you've been able to juggle your bills without trouble without the 2 percent raise, then theoretically, you should be able to put the money aside for a rainy day, says Roslyn Lash, a financial counselor in Winston-Salem, North Carolina.
"Having an emergency savings is imperative, and an extra 2 percent per month will be helpful if you later need medicine, a car repair or to pay an unexpected bill," Lash says.
As long as that medicine, car repair or unexpected bill isn't more than, say, $324 or $648 if you're a married retired couple. Still, she is correct. If you've been able to get along before this raise, diverting the money into an emergency fund can only help you in the long run.
[See: 13 States Without Pension or Social Security Taxes.]
Give the money to your grandkids. Dellutri says that you could consider diverting your 2 percent raise to a 529 plan to help your grandchildren save for college.
"While it may not seem like much, over time, it could grow dramatically depending upon the age of the child," he says.
If starting or going through the 529 paperwork doesn't appeal to you, but you like the idea in theory, you could put away the money every month and use it for holiday gifts for your grandkids and other family members.
Do something nice for yourself. You could save the money to go toward a vacation or something entertaining like a concert or musical. You might also try purchasing a smartphone or a new computer via installment payments, says Tenpao Lee, interim dean and professor of economics at Niagara University in Lewiston, New York. He is the first to admit, though, that the money isn't all that meaningful of a change.
In September, the inflation rate was 2.23 percent, slightly higher than the proposed 2 percent raise of Social Security, Lee says. "Therefore, realistically, Social Security recipients will not be better off at all."
Which makes for an even stronger argument to take that "extra" money and do something nice for yourself.
More From US News & World Report
